Starting with the United Kingdom, Japan's Fast Retailing is poised to fulfil its aim of becoming the world's largest casualwear retailer, according to a report in the latest issue of Textile Outlook International. And before the end of the year, the company will start building a massive clothing chain in China.

In less than a decade, Fast Retailing has more than lived up to its name. Its Uniqlo brand name has grown from a chain which was little known outside the suburbs of Japan's major cities to become the country's number one clothing outlet. Net sales have risen fourfold in only two years, says Textile Outlook International.

The first Uniqlo shop opened in Hiroshima in 1984. By early 2002 Fast Retailing had captured around 15% of the Japanese market in volume terms. An estimated one in five Japanese now owns a Uniqlo fleece, the symbol of its fashionable rather than trendy products.

By 2001 Fast Retailing's sales amounted to 418.6 billion yen (US$3.13 billion, Euro3.59 billion, £2.19 billion). But in the long term, by expanding rapidly overseas, the company aims to increase that figure to no less than 2,000 billion yen (US$15 billion, Euro17.2 billion, £10.5 billion). In fact foreign sales will account for half of Fast Retailing's total sales -- if all goes according to plan.

Fast Retailing's design for success will be based on the model which has worked such miracles so far. Its philosophy is to keep things simple -- and Uniqlo focuses on less than 200 items. Its operations -- from buying through to planning, production, and marketing -- are fully integrated.

The company says its main aim is to sell clothing which enhances what people already have in their wardrobes, and which will mix and match easily with other brands.

Company president Tadashi Yanai sums up the firm's approach, saying, "while there seems to be a general perception that the only choice consumers have is between pricey designer clothing and cheap unbranded apparel, our aim is to market low-priced clothing of superior quality."

Fast Retailing relies on outsourcing, mainly through trading companies. As much as 80% of its merchandise is manufactured in China, and a further 10% is made in South East Asia.

China may have a poor reputation as a manufacturing base with some. But Fast Retailing keeps a close eye on the manufacturing process by making daily visits to factories.

All quality control checks take place before shipments. Codes enable the company to identify where faulty items were produced. Furthermore, almost all overseas production is carried out under cooperative agreements at factories funded and managed by other companies.

Fast Retailing demands the highest standards from its suppliers. In return it operates under a "buy-all" contract in which it commits itself to buying everything that it has ordered from its merchandise suppliers. This helps to build trust and better coordination with suppliers, leading to improved quality and lower costs. But it also means that Fast Retailing must get its demand forecasts absolutely right.

Fast Retailing keeps its costs down by renting its shops. In some cases it ties rents to turnover, which means that it can share risks with the shop owner. At the same time, the company is quite prepared to shut shops which are not meeting expectations.

Heads of stores are remunerated under a turnover-based incentive scheme.

GOING FOR THE GAP

Fast Retailing opened five stores in and around London in 2001 -- in Knightsbridge, Wimbledon, Uxbridge, Romford and Bromley - and will have a further ten stores by mid-2002. Within three years, says the company, there will be some 50 Uniqlo shops dotted around the United Kingdom.

But why choose such a crowded market for its first overseas foray? Fast Retailing felt that the UK would be a tough nut to crack. But success would give it the confidence to tackle other markets. Moreover, Fast Retailing's growth needs to be exponential for its formula to work. And exponential growth can only be achieved in a large, open market.

Fast Retailing has also opted for different shopping environments, so that it can monitor different formats and assess the customer profiles which each format suits best.

Fast Retailing's stores have been designed by British design guru Terence Conran. The emphasis is on openness and simplicity, very much in the mould of Gap stores. Indeed, Uniqlo has its eyes set on Gap customers.

And with prices fixed at around two thirds of those charged by the US chain -- but with quality and design which easily match it -- Uniqlo looks set to make an impact on British consumers.

If Fast Retailing does crack the British market, it will be one of the few Japanese clothing retailers to do so. Muji has managed to gain a foothold with 16 stores, but Yohan and Sogo failed to capture British consumers. The key to the UK market, say the analysts, is the ability to keep up with rapidly changing tastes while keeping prices low.

FINANCIAL PERFORMANCE

Fast Retailing's financial performance has been little short of meteoric. Revenue and net income increased for the 13th consecutive year in 2001. Net sales rose by 83% on the previous year, from 229 billion yen (US$1.71 billion, Euro1.96 billion, £1.20 billion) to 418.6 billion yen (US$3.13 billion, Euro3.59 billion, £2.19 billion).

However, sales have been slowing down. In 2001 Fast Retailing recorded a still impressive 42% increase on the previous year. But this was less rapid than the 68% rise achieved in 2000. And in the second half of the company's 2000/2001 financial year, growth slowed considerably with sales in the six months to October up by less than 20%. Inevitably, the pundits are paying close attention to the company's performance.

Worse still, in October 2001 sales were down by 5.3% compared with October 2000. And had it not been for Fast Retailing's aggressive policy of pushing ahead with opening new stores, the real fall would have been almost 25%.

The company says that it misjudged demand levels and ordered too much stock. Soaring sales in the first half of the year meant that it was unable to meet demand on some occasions. Thus it stepped up orders in the second half. But demand fell short and, sticking to its "buy all" policy, clothes had to be sold off at discounted prices.

For the moment, though, Fast Retailing remains well ahead of its domestic rivals -- who have continued to suffer from the poor performance of the Japanese economy.

WILL UNIQLO BECOME A VICTIM OF ITS OWN SUCCESS?

The danger for Fast Retailing is that its strengths could become weaknesses. So far, by sourcing 80% of its merchandise from China, it has managed to remain highly competitive. But its rivals are already following suit, and many will be looking to produce cheaper imitations of Uniqlo items at short notice.

Strong merchandising abilities account for a large part of the firm's explosive success. But some voices have begun to ask what will happen if it gets its merchandising wrong again, as it did in the second half of 2001.

Fast Retailing's period of rapid expansion may well be coming to an end. Merrill Lynch Japan Securities Co, which predicted October's lower sales, seems to think so. But analysts also forecast stable sales growth - albeit at a slower pace - after August 2003.

Fast Retailing was also given an "A" long-term credit rating by Standard and Poor's, and was seen as more than able to defend its market share through competitive pricing and strong merchandising abilities.